Recent studies have shown that the average family has an estimated $15,000 in credit card debt alone, not including mortgages, student loans, and other monthly payments. When so much debt has built up, it can be a daunting task to repay the balance in a timely manner. High-interest credit cards can make the situation even more complex, and paying the credit card balance in full may seem like a losing battle. Also, if you make a payment late, you are assessed penalties that negatively impact your balance and credit history. With so much to consider, consumers are trying to find alternative ways to decrease or alleviate credit card debt altogether.
When it comes to decreasing your credit card debt, a credit card balance transfer may be your best option. There are pros and cons to consider, but, if done properly, you can help your family save thousands in interest and late fees in the future. A balance transfer is simply a way to move an existing balance from one credit card to another credit card that has a significantly lower interest rate. Your primary goal should be to transfer to a card with an interest rate no higher than four percent. Once the balance is transferred, you generally have about 18 months to pay the entire balance off before a much higher interest rate is applied. Many credit cards have an introductory rate (sometimes referred to as a teaser rate) that will not extend over the lifetime of the card. Credit card companies offer these rates to entice new customers and give you an incentive to switch your balance to their card.
It is also important to plan ahead. Calculate how you much you will need to pay monthly to ensure your entire balance is paid in full before the teaser rate ends. Always make sure you are not building more debt for yourself in the long run by not paying the balance in full. This would be counterproductive to what you are trying to accomplish. Also consider the balance may take some time to transfer to your new low-rate card. In the meantime, you should always keep making your minimum payments to avoid costly fees that will only assist you in accruing more debt. Once you have received notifications from both credit card companies stating the balance has completely transferred, you should consider closing your older account so you are not tempted into making purchases on this card when you are low on cash.
When agreeing to a credit card balance transfer, make sure you are reading all of the fine print in the terms and conditions. Although, this can be a tedious task, it is imperative in understanding the actual conditions, so there are no surprises in the future. Let's face it, banks are in the business of making money. They offer these low rates and introductory terms to gain new customers. They are really counting on most people to neglect their payments and accrue additional fees and penalties. This is great for their bottom line, but awful for yours. When researching potential credit card companies, here is a list of items to read carefully.
- Is 0% really 0%? Does it apply to all new customers, regardless of credit history?
- What are the fees and penalties associated with late payments?
- When does the teaser rate end? Is there any grace period, or is that a fixed date?
If you have trouble answering these questions, make sure to call the credit company and inquire. They are required to provide you with truthful answers. Conversations are also recorded, should there be any misunderstanding in the future regarding the information you were given. The fact of the matter is, a credit card balance transfer can be a great way to save money on high-interest fees, but you must do the research necessary to ensure you are getting what is advertised. Don't be afraid to ask questions, consult a family member that may have experience with credit card balance transfers, or just go over the contract until you know what you are about to agree to. In today's economy, money does not come easy and saving a few dollars by a simple credit card balance transfer may be the answer for you. Understand that it is not for everyone. You have to commit to pay the money back and follow the terms and conditions. If you can do this, you should consider this type of money saving opportunity.
